Fights In The Google Monopoly Debate Miss Key Points

The noise about whether Google is a monopoly that needs to be controlled continues to ramp up, with Google itself releasing a “charm offensive” set of slides after its lobbying using those slides was outed by Consumer Watchdog. I’ll cover that below, but as I watch the debate continue over whether Google has too much marketshare or strong enough competitors, I feel like the bigger issue that Google is more vulnerable on is getting lost. Google potentially controls too many points along the internet advertising ecosystem

Back at the end of 2007, I wrote After The Google Antitrust Breakup, which was a fictional account of how and why Google might be broken up. When I looked at the issues that concerned me, the amount of search share Google had or number of competitors didn’t factor into it. Instead, it was the inherent conflict of Google being one of the major drivers of traffic to internet web sites and a company that in turn earns plenty of money off ads on those web sites. From what I wrote:

The Search Engine Reform Act of 2009 (SERA) had a fundamental principle that companies with business models around being guides to the web — regardless of the technology or human effort involved to create those guides — were forbidden from also owning content that might be listed in those guides.

“If I buy a restaurant guide, I don’t expect the publisher of the guide to also own or make money off of some of the restaurants in the guide,” said one US senator during debate over the act.

In the current round of real-life debate over Google and potential anti-trust moves, I see no one really talking about this aspect. Perhaps I miss the point. Or perhaps those debating Google are looking at the “easy” targets of marketshare and competition that likely won’t prove so easy to enforce against.

For instance, Google’s been trying to make much of the fact that it faces serious competition out there. It trotted out the fact that for about a microsecond in internet time, back in January, many people used Yahoo when Google flagged the entire internet as malware. It doesn’t mention that they immediately came back to Google when the blip was over.

More recently, much ado has been made about this year’s Founder’s Letter, and whether Google cofounder Sergey Brin really is worried about new technologies coming from others or simply relieved that he can highlight that there is competition out there.

As I’ve said before, absolutely — Google wants the world to believe they might lose people at any moment, while its split-personality still fights against anyone that questions its abilities. I’m sure Google is worried about new technologies, but you bet — it’s going to play up any threat, no matter how small, as far larger than it really is.

A Natural Monopoly?

Of course, another round of questioning that’s been going on is whether Google is a “natural” monopoly, and if so, what’s wrong with that? I’d largely agree with that view. Google does purchase distribution to its services. But by and large, people are using Google because they want to, I’d say. Googlers don’t force people at gunpoint to use Google.

In fact, Google’s natural monopoly was one reason why I found the concerns over the potential Yahoo deal so absurd. As I wrote last year, before Google pulled out of the deal when faced with anti-trust threats:

What percentage of the paid search market (if any) does Google have to have before it is forced to be regulated?

70 percent? 80 percent? 90 percent? Or is it fair game for it to have as much share as it can get, as long as it has not shown to have acted in an anti-competitive manner?

A Google-Yahoo deal seems a side-show in answering this. If folks are certain Google will have too much power over pricing, there’s an excellent argument it has this already. So let’s not get the argument distracted over Yahoo.

Now that the deal is over, Yahoo continues to lose key employees to Microsoft, making it almost a certainty in my book that it will have to sell search. That means a weaker hand to negotiate a search deal with Microsoft. And should Microsoft purchase Yahoo’s assets, there remains absolutely no guarantee that Microsoft will grow share against Google. There’s an excellent argument that the opposite will happen, that the entire saga of Microsoft & Yahoo has cost both companies two years’ worth of time they couldn’t afford to lose.

So I wonder again? Is it a question that Google simply can’t have too much share — or that it can’t acquire share?

If it can’t acquire share, that’s sort of bad news for Twitter and other would-be start-ups. It means that one of the chief potential suitors — Google — can’t look to purchase them. It almost hands Microsoft carte blanche to move in on anything it wants, especially as we know now that Microsoft will fight tooth-and-nail to lobby against anything Google does (and we also know, of course, Google does its own fighting against Microsoft).

Revenue Isn’t A Measure Of Competition, These Days

We’ve also had the issue where Google faces a second antitrust inquiry over CEO Eric Schmidt being on the board of both Google and Apple. But not to worry — apparently the two companies don’t compete in areas where they share more than 2 percent of revenue, and Schmidt recuses himself in areas that might be competitive, such as discussions about the iPhone.

From my perspective, it’s hard for me to understand how Schmidt isn’t having to walk out of the room all the time. I mean, consider the areas where Apple competes or may conflict with Google:

I have no doubt there’s much more. Apple does have its own applications. Google, by Schmidt’s own definition, is a “Search, Ads & Apps” company. The applications alone pose conflicts.

As for no revenue overlap, when might that ever happen? It’s the wrong rule. Google subsidizes practically all its other products using ad revenue from search, contextual and display. So far, those products serve as loss-leaders to help bring people back into Google search. Measuring whether there’s competition with Apple on a revenue basis — to decide if Schmidt should be on the Apple board or not — is the wrong yardstick.

The Charm Offensive Slides

So now let’s go to those slides. As Google tries to stem the antitrust tide, it’s apparently been doing a presentation to policymakers, journalists, ad agencies and others, as Google writes about today. You can listen to a recording here, or just read the slides that Business Insider has here.

These slides were apparently posted only after Consumer Watchdog got a hold of them and did a marked-up version inserting its own commentary into them. You’ll find those here at Wired or here at Consumer Watchdog itself.

I’d actually recommend reading the marked-up version, so that you’re getting both sides represented at once. Well, not exactly both sides, but perhaps both extremes.

Points & Counterpoints

Some things that resonated with me:

“Open is better than closed” is apparently one of Google’s key competition principles. Bull. Consumer Watchdog calls them out on this, saying “where we don’t already dominate the market.” I agree — and wrote about this back in my Google: As Open As It Wants To Be (i.e., When It’s Convenient) article at the end of 2007.

Ironically, Google gets a taste of its own medicine with Twitter. It still can’t access the “firehose” of information that Twitter has, in order to build a decent real-time search service. If it can’t strike a deal, expect to hear the company start pushing on how “real-time data” should be open. Don’t expect to see it lobby to make its web search database open or support an open crawling standard, however.

“Competition is just one click away” is another principle. Yep, and you can quit smoking tomorrow. This sound bite sounds good but doesn’t reflect the reality of the Google Habit. People have that Google Habit largely because they want it and Google’s earned it. But no, they’re not going elsewhere easily. See my The Google Hive Mind and Tough Love For Microsoft Search posts for more about this.

“Advertisers pay what a click is worth to them” is yet another principle. Nope. AdWords is indeed a black box, and if Google doesn’t open that up more fully, it will continue to be attacked on this front.

“Make It Easy For Users To Change” is yet another principle that I think is fairly true. You can leave Google and take your data, though if you don’t want some of the cookie-tracking across the web, that’s harder, as Consumer Watchdog points out. Oh, and that’s harder to do with Yahoo and Microsoft, which also do tracking.

Privacy – At the end, Consumer Watchdog raises this as an issue that’s not mentioned in Google’s slides, citing the absurd Privacy International report. For them to cite this report really undermines a lot of the other valid statements they made. I’d encourage them to find better stats. Google Bad On Privacy? Maybe It’s Privacy International’s Report That Sucks explains more that’s wrong with that report.

C’mon – Share Your AdSense Cut, Google

Overall, Google continues to be in a tough spot. It has largely earned a natural market dominance by building good products. It’s going to continue to get hammered on the size front, and it might find some future deals blocked out of competitive concerns. Ironically, that might not improve competition. We’ll see.

More than anything else, I think the focus really should be on whether a company that delivers so much traffic to sites should also be one of the primary ways many of those sites also earn revenue. At the very least, Google should move quickly to reveal exactly what share of AdSense revenues it keeps for itself.